Data-Driven Display Ads: What's Next

Will online display advertising ever achieve the efficiency of search advertising?

Scores of companies, from established ad agencies to ad technology startups, are dedicating substantial resources to help bring the right advertising to the right person at the right time.

Keeping track of developments can be daunting. Just as soon as I understand how a data exchange like BlueKai works or learn how data provider Acxiom will be offering display ad targeting solutions and “social intelligence,” online advertising verification is resurfacing as a niche. (Two months ago, DoubleVerify picked up $10 million from investors.)

So it was great to get a big-picture overview of the industry from Terence Kawaja, an investment banker from GCA Savvian, during the Interactive Advertising Bureau’s Networks & Exchanges conference this week. His 22-minute presentation provides insights into where he and his team see the online display industry headed.

My favorite: the slide, “Display Advertising Technology Landscape.”

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While showing how complex the sector is, it’s an easy-to-digest who’s who of major players in more than a dozen ad tech categories. These include agency-owned media buying platforms; third-party media buying services also known as demand-side platforms; companies that specialize in creative optimization, data optimization, data aggregation, ad verification; ad exchanges; and ad networks.

Kawaja offered these predictions about the future of businesses tied to online display advertising:

• “Life gets tough for ad agencies,” he said, referring to agencies that do not have in-house media-buying optimization technologies. “These guys are relying on DSP technology companies to provide one of the most critical aspects of their value-add to their clients,” he said. “Everyone has to defend their position of the table.”
• Look for Google to play a bigger role in online display advertising. Since spending $3.1 billion to acquire DoubleClick in 2007, Google will want a positive return on its investment. “[Google] is virtually in every single component of the [online advertising] ecosystem. Not only that, they have unified billing,” he said.
• The online display ad tech sector, he warned, is headed for consolidation. By his estimate, $2.5 billion has been invested in nearly 200 companies in 24 categories related to online display advertising. “This [online display ad] channel has a lousy $8 billion in ad spend compared to search. And [in search] you have a lot fewer players…and a $17 billion ad model,” he said. With so much venture capital chasing a limited amount of revenue, Kawaja anticipates there will be some fallout, or “investment roadkill.”
• Potential targets for acquisition or investment on his list include: MediaMath, InviteMedia, Turn, [x + 1], Efficient Frontier, DataXu, Dapper, Eyeblaster, BlueKai, and Quantcast. Businesses potentially interested in these ad technologies include ad holding companies such as WPP and Publicis; marketing and commerce companies such as Google, Yahoo, Microsoft, AOL, Amazon.com, and eBay; technology companies such as Adobe, Oracle, and IBM; and network/data companies such as Akamai, Cisco, Acxiom, Experian, and Nielsen. Large ad networks may also make some acquisitions so they remain in the game.

Bottom line? The shift to data-driven display advertising will likely cause headaches for some ad agencies, especially those unable to embrace technology. Mostly, Kawaja’s optimistic about the result for advertisers: advertising rates should drop while advertising will become more effective.

Social Sharing: Another Approach to Targeting Ads?

Companies are also trying to figure out how social networks and activities can be tapped to target display ads. “Its early days are unproven fully, but Facebook believes that’s the holy grail,” observed Kawaja.

Executives at ShareThis, a company known for its widget that makes content sharing easier, are betting that “social sharing” can provide insights for effective ad targeting. The company is identifying “social influencers” based on content shared about selected topics and then offering advertisers the opportunity to target ads to those influencers.

In March, ShareThis ran its first ad campaign, working with Empower MediaMarketing, a Cincinnati-based agency, and Mederma, a brand that produces over-the-counter skin creams for treating scars and stretch marks.

ShareThis CEO Tim Schigel and Empower CEO Jim Price were enthusiastic about the results:

Ongoing Mederma Campaigns in 2009-2010 (without ShareThis)
Search ads: 1 in 4 people clicked to redeem the coupon (about 25 percent)
Contextual display ads: 1 in 10 people clicked to redeem the coupon (about 10 percent)

Mederma Campaign in March 2010 (with ShareThis)
Display ads targeted to social influencers: 1 in 2 people clicked to redeem the coupon (50 percent)
Display ads targeted to recipients of shared content: 1 in 8 people clicked to redeem the coupon (12 percent)

“Mederma was the perfect client to test the ShareThis technology,” Price wrote in an e-mail to me. “Mederma is a high consideration product that we wanted to associate with content that was being shared by influencers. We already do some influencer marketing around the brand with tactics such as blogger outreach in addition to our search and display campaigns. We felt that ShareThis was an additional tactic that we could compare against all our other tactics.”

While these results are based on campaigns involving only one brand, they do show promise for this approach. The key here, though, is to ensure this kind of targeting advertising does not intrude on social conversations or consumer privacy.